India is haunted by an unprecedented economic deprivation

The situation, marked by widespread unemployment and inequality, calls for policy that improves the lives of the working people while taxing the rich.

A voter goes back to carrying water pots after casting her vote in the second phase of the election, in Dudu district of Rajasthan, on April 26. | Photo Credit: PTI

The economic situation in the country today is extremely grim. It consists in the fact that the economy, through its spontaneous functioning, does not provide a level of income to the overwhelming majority of people that is enough to buy even a subsistence bundle of goods by contemporary standards.

The scale of this is unprecedented in the past 50 years and is only alleviated to some extent by government-run relief programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and the scheme providing 5 kg of free foodgrains a month to each beneficiary, which was introduced during the COVID-19 pandemic.

Besides, the casualisation of the workforce has entailed work-rationing in a period of growing unemployment; this distributes deprivation over a larger workforce and hence somewhat lightens the burden on each, instead of concentrating it on some. But the deprivation that would prevail in the absence of such relief schemes, and which prevails even in the presence of such schemes, is greater than at any time during the past 50 years.

This may appear to be hyperbole. An immediate objection would be raised against it. What constitutes a “subsistence bundle” is a matter of judgment, and comparing deprivation across time, defined as the inability to purchase each period’s “subsistence” bundle, is even more problematic. But while several components of a “subsistence” bundle change over time with the introduction of new products, a basic component like a certain amount of food (with a certain calorific value) can be taken as a constant for every “subsistence” bundle. Average calorie intake is known to increase with real income, at least over the income range we are considering. Deprivation, therefore, can be assessed by looking at calorie intake.

Calorie intake

In 1973-74, when poverty estimates began in the country, the Planning Commission took 2,200 calories a person a day in rural India and 2,100 calories a person a day in urban India as benchmark figures; those unable to access these levels were considered poor. We can take the same benchmarks and assess the extent of deprivation by looking at the percentage of the population unable to access them.

The percentage of rural population below this norm in 1973-74 was 56; in 2017-18, it had increased to well over 80 per cent. For urban India, the percentage was 60 in both years^.1 The weighted average was certainly much higher in 2017-18. In fact, the 2017-18 figures were so striking that the government decided to suppress them altogether. (The figures given here were worked out from whatever was briefly available.) Even the per capita rural expenditure in real terms in that year was lower than the figure from 2011-12 by as much as 9 per cent.

The detailed results of the NSSO survey for 2022-23 have not yet been published, and since this survey uses a different method from the earlier ones, its results cannot be compared with earlier ones. But given the fact that the period after 2017-18 has witnessed a pandemic, a draconian lockdown, a massive reverse migration to villages that has not been fully negated, the proposition that economic deprivation of the majority of the population, especially of the rural population, is more acute today than at any time during the preceding half century remains a valid one.

A host of scattered evidence also confirms the fact that since 2017-18, things have been no better. The National Family Health Survey-5 (NFHS) covering 2019-21 found that 57 per cent of the women surveyed suffered from anaemia compared with 53 per cent in NFHS-4, which had covered 2015-16, clearly suggesting greater nutritional deprivation.

Likewise, India’s score on the Global Hunger Index has remained more or less unchanged between 2015 and 2023; since child mortality rate, one of the four variables that go into the construction of the index, has been declining continuously, it follows that the others together, which reflect nutritional deprivation more directly, have become worse.

Of course, to argue an increase in deprivation is not to suggest that people are actually “worse off” today than half a century ago. The living standards of the people depend both on their private earnings together with state transfers towards them and on collective facilities that are available to them. We cannot, therefore, conclude from the fact of a decline in their real private earnings, or in private earnings plus state transfers, that there has been a “worsening” of their living standards. But the decline in private earnings is itself of great significance. The question is, why has it occurred?

There is a tendency to put the entire blame for it on the Narendra Modi government’s capricious policies. These capricious policies, such as the mindless demonetisation, or the draconian lockdown following the COVID-19 outbreak without providing security to tenants who could not pay rents, all of which had an adverse effect on the petty production sector including peasant agriculture, certainly played a role, but they were superimposed upon a more basic underlying trend towards mass deprivation introduced by neoliberalism.

This is borne out by the fact that the percentage of rural population accessing less than 2,200 calories had already increased from 58 in 1993-94 to 68 in 2011-12; the percentage of the urban population accessing less than 2,100 calories had already increased from 57 in 1993-94 to 65 in 2011-12.

Pursuit of neoliberalism

Deprivation, in other words, had already been occurring, long before Modi appeared on the horizon. Modi’s culpability lay in his even more enthusiastic pursuit of neoliberalism (to the point of introducing the three infamous farm laws in conformity with neoliberal demands); and his imposition of a set of capricious measures on top of the trends already unleashed by neoliberalism.

Two such trends are important for us here. One is the crisis imposed on petty production and peasant agriculture because of the withdrawal of state support that this sector had enjoyed under the preceding dirigiste regime (a withdrawal that the Modi government was trying to carry forward with its farm laws).

The revival of private moneylending, the exposure of peasants² growing cash crops to world market price fluctuations, the entry of multinational agribusiness and domestic monopolists into the agricultural sector where they deal directly with the peasants as in colonial times, and the privatisation of services like education and healthcare that raises the peasants’ cost of living—are all symptoms of this withdrawal; its effect is a squeeze on the peasantry and their exodus to towns in search of work.

Tribal women waiting outside a ration shop in Tatem village, near Dantewada town in Chhattisgarh, on April 16. The free ration scheme has provided relief to crores of vulnerable people. | Photo Credit: IDREES MOHAMMED

The second is the increase in the rate of growth of labour productivity in the economy because of the rapid technological-cum-structural change introduced by greater competition among producers in different countries arising from the lifting of restrictions on trade flows.

Since the rate of growth of employment in an economy is simply the excess of the rate of growth of output over the rate of growth of labour productivity, the increase in the latter keeps down the growth of employment; even when GDP growth accelerates under neoliberalism, as is supposed to have happened in India (though the acceleration is much exaggerated), employment growth falls even below what it was under dirigisme and even below the natural growth rate of the workforce.

Let alone absorbing displaced peasants, the growth process does not even absorb the natural increase in the workforce. The result is a rise in the labour reserve relative to the workforce, although the form it takes is reduced employment per capita for a largely casualised workforce.

Highlights

• The crisis is only alleviated to some extent by government-run relief programmes such as MGNREGS and the free foodgrains scheme.
• Economic deprivation of the majority of the population, especially of the rural population, is more acute today than at any time in the past 50 years.
• Demand for work under MGNREGS rose from 265.3 crore person-days in 2019-20 to 305.2 crore person-days in 2023-24.

Unemployment crisis

Both these tendencies characterising neoliberalism have been in operation in India; they have the effect of immiserising the working population in absolute terms, which is what we see. At the same time, the increased rate of growth of labour productivity in the midst of such immiserisation raises the share of economic surplus in the GDP, which underlies the immense increase in income and wealth inequality.

The finding of Thomas Piketty and his associates that income inequality in India—measured by the share in national income of the top 1 per cent of the population—at 22.6 per cent in 2022, was higher than at any time since 1922, when the income tax that provides the basis for such estimates was introduced, should cause no surprise. The inequality generated by neoliberalism (the dirigiste regime had brought down the share of the top 1 per cent to 6 per cent of national income by 1982) exceeds even what existed under the British Raj.

Such an increase in inequality, which is a worldwide phenomenon not confined to India alone, reduces the level of aggregate demand at any given level of income (since the poor consume more of a unit of income than the rich). This gives rise to a tendency towards overproduction which actually gets realised in the form of a secular stagnation, as the state under neoliberalism is prevented from taking any fiscal measures to counter this tendency (for reasons we discuss later), and monetary measures are toothless to do so.

This happens both at the global level and in the Indian economy; what it means is that the growing underemployment that neoliberalism caused even in its heyday reaches its denouement in an explosion of underemployment when neoliberalism enters a period of crisis. This is what we see today.

The employment scenario does not get revealed clearly from government statistics since the concepts officially used for measuring unemployment are all utterly inadequate when unemployment takes the form of a reduction in hours of work per person within a substantially casualised workforce; besides, women’s unpaid work in family enterprises is counted as employment although it is against ILO definitions.

On the other hand, data collected by the Centre for Monitoring Indian Economy, although based on the self-perception of the respondents themselves, show the rise in unemployment much more clearly. They show the unemployment rate remaining more or less steady between 5 and 6 per cent of the workforce between 2008 and 2019; thereafter, it increases significantly, reaching 8 per cent in March 2024.

MGNREGS data

There is, however, plenty of indirect evidence to show the seriousness of the unemployment scenario. The first relates to the demand for work under the MGNREGS.

In 2019-20, the demand was for 265.3 crore person-days, which shot up during the next two pandemic-affected years to 389.9 crore and 363.2 crore person-days respectively. But even after the pandemic had abated, this demand continued to remain much higher than in 2019-20; in 2023-24 it was 305.2 crore person-days, a 15 per cent rise from 2019-20.

The lack of job opportunities in rural India is also reflected in wage behaviour. Between 2014-15 and 2022-23, the average money wage rate for men for all occupations, agricultural and non-agricultural, increased at a rate less than the rate of growth of the rural consumer price index and also less than the food price index. Although the difference is small, it suggests a lowering of the real wage rate. It is this increase in the labour reserve relative to the labour force, symptomatic especially of a crisis-hit neoliberalism, that underlies the acuteness of deprivation we currently observe.

At a recruitment drive for work in Israel, at the Industrial Training Institute in Lucknow on January 25. The unemployment crisis is so severe that thousands are willing to work in Israel despite the risks of the ongoing war. | Photo Credit: NAEEM ANSARI/AFP

In this context, when the system cannot spontaneously provide a bare subsistence income to the majority of the population and when even the relief provided by government schemes cannot fully negate this situation, the tendency is for the ascendancy of neo-fascism. This is a worldwide phenomenon in the current period of crisis. A neoliberal-neo-fascist alliance, manifested in a partnership between the monopoly bourgeoisie integrated with globalised capital, and neo-fascist elements, comes up everywhere, shifting the discourse away from issues of material life towards “othering” a minority and generating animosity against it; its objective is to shore up the crisis-hit system and prevent any possible challenge to it.

Neo-fascist government

A neo-fascist government, however, cannot overcome the crisis any more than a liberal government. Monetary policy, as already mentioned, is a blunt instrument for reviving the economy, and any effective fiscal intervention in the form of a larger government expenditure is ruled out. To be effective, it has to be financed not by taxing the working people who consume much of their income anyway, but by taxing the rich or by increasing the size of the fiscal deficit, and both these are ruled out because they are disliked by globalised finance whose writ must run.

It must run because the nation state that confronts globalised finance must “retain its confidence” in order to prevent a capital flight. Within neoliberalism, therefore, there is no solution to the crisis; overcoming it requires going beyond neoliberalism.

To start with, however, any government keen to overcome the crisis must push against the boundaries of neoliberalism by pursuing a policy that improves the lives of the working people while taxing the rich. Many have suggested in this context a programme of providing a basic minimum income to all households. But the basic minimum income scheme, notwithstanding its obvious appeal, has several limitations.

First, it gives the impression of being a charity, which violates the dignity of the people, government largesse for which they should be grateful. Second, it can be reduced or withdrawn any time at the whim of the government. And third, handing over money to people would scarcely improve their lives unless there are also institutions where such money can be spent without the spender being fleeced.

For all these reasons, the appropriate measure is to introduce a set of universal, constitutionally guaranteed, and justiciable economic rights, that is, a set of fundamental economic rights analogous to the fundamental political and civil rights we currently have.

Five economic rights

A simple calculation shows that the introduction of five fundamental economic rights, namely, a right to food (everyone having access to food exactly as the below poverty line population had in the pre-pandemic period); a right to employment (failing which the person should be paid a full wage); a right to free, quality education in public institutions (up to the higher secondary level); a right to free, quality healthcare through a National Health Service; and a right to a living, non-contributory, old-age pension and disability benefits, can be financed by imposing just two taxes on the top 1 per cent of the population.³ The first is a 2 per cent wealth tax, and the second is a one-third inheritance tax on whatever is passed down to progeny or friends.

To be sure, these taxes will meet only the financial requirements of the proposed rights-based welfare state; the real resources for it will have to be raised through appropriate production planning. And the details of administration, of demarcation of responsibilities between the Centre and the States, have to be worked out. But a rights-based welfare state that overcomes the crisis in which our economy is currently placed, and also overcomes the threat from neo-fascism, is perfectly feasible. If a constitutional amendment for effecting it seems difficult, then a unanimous resolution passed in both Houses of Parliament, as was done with the MGNREGS, should do.

Prabhat Patnaik is Professor Emeritus, Centre for Economic Studies and Planning, Jawaharlal Nehru University.

¹ All calculations involving calorie intake are taken from Utsa Patnaik’s forthcoming book Exploring the Poverty Question.

² I use the term “peasants” to denote all farmers who participate in agricultural operations and who have not diversified out of agriculture.

³ P.Patnaik and J.Ghosh, “For a Set of Universal Economic Rights” in Nikhil Dey, Aruna Roy and Rakshita Swamy ed. We the People: Establishing Rights and Deepening Democracy, Penguin India, New Delhi, 2020.